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Andorra’s banking sector: Facts & Figures

Updated September 2018 – For earlier editions of Facts & Figures click here

The Principality of Andorra is a European micro-State located in the Central Pyrenees between Spain and France with a population of around 80,000.

For Andorra’s economy, 2017 was a year of consolidation, with positive data in terms of jobs and wealth creation. GDP grew by almost 2%, inflation rose by 2.6% and consumer indicators continued their promising trend with increases in car registrations (up 18.2%) and imports (up 6.6%), and the number of people visiting the country, with over 8 million tourists. These data point to a favourable outlook both for Andorra and for the Andorran financial sector.

The financial sector is a cornerstone of the Andorran economy due to its significant contribution to the country’s GDP (together with the insurance sector, the financial sector accounts for approximately 21%, while employing 5% of the workforce), with its banking system at the core.

The financial system comprises five banking groups, one specialised credit institution, eight financial investment firms, four asset management firms and 34 insurance companies, 18 of which are branches of foreign insurance companies authorised to do business in the Principality.

The banking sector has over 85 years’ experience in the business with a presence in 14 countries and as of today comprises a total of five banks which together manage over €46 billion. Out of the five banks, three are Andorran-owned, one is a subsidiary of a Spanish bank and the other is owned by an American fund.

The banks offer a full range of banking services including loans and credit, asset management and financial consultancy, operations with liabilities, financial analysis and other services (credit cards, transfers, etc.). They also have specialised subsidiaries of financing, insurance and asset management firms.

One of the challenges for the Andorran banks is to continue improving client services, both through face-to-face and remote channels. In this context, one of the sector’s main bets has been the digital transformation. Furthermore, a high-profile reform that will come into force this year is around payment services. Andorra and the banking sector are also in the process of becoming SEPA participants.

Andorran banks enjoy a high level of capitalisation. Andorra’s financial institutions closed 2017 with a 1.5% increase of assets under management reaching an aggregate of over €46 billion. This growth shows the strength and stability of Andorra’s financial centre at a time of regulatory changes in terms of transparency and banking regulation.

The success of this international strategy is proven by the fact that around 50% of the assets under management are held outside of Andorra.

The allocated net profit was €131 million in line with the international context of persistent low interest rates and the substantial investment required by the new rules and regulations. Return on equity (ROE) in 2017 was 9.85%.

Andorran banks have also contributed to Andorra’s economic growth, last year they granted €5.98 million worth of loans and credit transactions, the latter representing 31% of the lending activity.

Customer deposits amounted to €10.16 million which represent 71.8% of total assets. The loan-to-deposit ratio is 57% in line with the characteristics of private banking.

The main characteristics of the Andorran banking sector are providing added value services, a sharp focus on services and strong internationalisation and sustainable and profitable growth. The assets managed by Andorran banks have grown significantly in recent years, rising by approximately 60% in the last ten years.

Contributor: Natàlia Marimón Allan n.marimon@andorranbanking.ad

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